Kingfisher Air Submits Second Revival Plan as UB Offers Help

April 11 (Bloomberg) -- Kingfisher Airlines Ltd., grounded
since October following five years of losses, submitted a
revival plan to Indian authorities for a second time after the
previous proposal was rejected as inadequate.

Parent UB Group will give 6.5 billion rupees ($119 million)
to help the carrier restart flights, Kingfisher Chief Executive
Officer Sanjay Aggarwal said after meeting India’s aviation
regulator in New Delhi yesterday. The airline plans to resume
services with seven aircraft, he said.

Kingfisher’s present plan is more “practical” as private
airport operators and aircraft lessors support it, a government
official said. Liquor tycoon Vijay Mallya’s latest attempt to
revive the Bangalore-based airline comes as Indian carriers
struggle with high operating costs and competition is set to
intensify with the entry of AirAsia Bhd. later this year.

“It’s a good thing if the regulator is seeing substance in
the plan,” said Harsh Vardhan, chairman of Starair Consulting,
a New Delhi-based company that advises airlines. “Nobody,
whether it’s creditors or lessors, would like to come in the way
of a restart. They know it’s a trade-off between write-off and
possibility of recovery.”

Indian authorities had rejected Kingfisher’s previous
revival plan, saying the funding pledged by the parent wasn’t
adequate to ensure reliable services and the carrier didn’t
disclose how it will pay money owed to airports. The aviation
regulator had suspended the airline’s permit in October
following flight disruptions caused by strikes triggered by
unpaid wages. The carrier’s flying permit lapsed Dec. 31.

Airbus A380

Shares of Kingfisher gained 4.6 percent, its first increase
in seven days, to 7.90 rupees at close of trading in Mumbai. The
stock has slumped 47 percent this year, after falling 29 percent
in 2012.

Kingfisher, the only Indian carrier to order Airbus SAS
A380 superjumbos, has defaulted on payments to creditors, fuel
suppliers and airports. The carrier, which was No. 2 in India by
market share in 2011, has a debt of 86 billion rupees.

Mallya, who founded Kingfisher in 2005, is under pressure
to repay the carrier’s debts. State Bank of India, the biggest
lender to Kingfisher, said earlier this month it will seize the
collateral pledged for the airline’s loans. An Indian court has
declined to stop banks from selling pledged shares of United
Spirits Ltd.

Pledged Shares

Mallya, who is selling a stake in United Spirits to Diageo
Plc, will use proceeds from the sale to pare Kingfisher’s debt,
Prakash Mirpuri, a UB Group spokesman, said in February.
Mallya’s UB Holdings lost some of its stake in United Spirits
and Kingfisher after banks sold a part of their pledged shares
on April 1, according to stock exchange filings yesterday.

Kingfisher has been seeking cash for more than two years
and held talks with investors and airlines including Etihad
Airways PJSC. Abu Dhabi’s Etihad is currently in talks with Jet
Airways (India) Ltd. to buy a stake in the nation’s biggest
listed carrier.

AirAsia, based in Sepang Selangor, Malaysia, aims to start
Indian operations in the fourth quarter after winning approval
last month. Southeast Asia’s biggest discount carrier is
entering India through a joint venture with the Tata Group after
the government eased aviation investment rules in September.

Overseas carriers are planning to expand in India as air
travel demand in the nation may surge threefold by 2020,
according to the Aviation Ministry. Still, airlines are losing
money as they struggle with rising fuel costs, airport charges
and a price war.

Jet, SpiceJet

Jet Airways hasn’t made an annual consolidated profit in
five years, while budget carrier SpiceJet Ltd. is headed for its
second straight year of losses, according to data compiled by
Bloomberg. State-owned Air India has lost at least 281 billion
rupees since April 1, 2007, government data show.

Aggarwal said Kingfisher aims to resume services with five
Airbus A320s and two ATR aircraft, before increasing the fleet
to 20. The planes for the restart are in operational condition,
the Indian government official said, asking not to be
identified, citing rules.

Kingfisher is also trying to win support for its proposal
from the state-owned Airports Authority of India, which controls
125 airports, the government official said. The Aviation
Ministry will consider a plan that will allow the carrier to
repay dues to Airports Authority in installments, the official
said.